"Fiat money is backed by men with guns; Bitcoin is not. So why should this thing have any value?"--Uber statist economist Paul Krugman.

Tuesday, October 28, 2008

Redistributive fallacies: Left, Right, ... and Libertarian

Lately in the presidential campaign the issue of taxation has been taking up a lot of the oxygen in the room, and we have been consistently treated to what I like to call ideological intellectualism, which boils down to high-sounding talk buttressed by statistics and truisms designed to convince everyone that a particular ideological point of view is supported by history, common sense, general morality, and economic theory.

The reality is that 99.9% of the people talking (and this includes an even higher percentage in Delaware)would find to their dismay that their arguments wouldn't pass the most cursory of smell tests among actual academics in the disciplines they purport to represent.

Why?

Because they generally fail on one or more of the three following aspects of sound scholarship (or just good undergraduate writing):

1) The confusion of unsubstantiated assertions with facts.

2) The cherry-picking of examples rather than the examination of evidence (which includes the responsibility not to create straw man arguments for your opponent, but to deal reflectively and realistically with the best arguments that run counter to your own analysis).

3) Doing research with the intent of supporting a particular proposition rather than discovering the truth. Granted that the truth is always a somewhat subjective judgment in any difficult case, there are still issues of intellectual integrity to consider.

Suppose you are doing a major research paper on Topic X. You order ten books through inter-library loan and nine of them come in quickly enough for you to write your paper. You even get your paper (this is fantasy, but it's my thought experiment) done a day or two before the deadline so you can proof it at leisure. Then, the night before your paper is due, the library calls and says the tenth book came in.

You figure, what the hell, I can add it to the bibliography, so you go pick it up. When you do, you discover to your chagrin that the tenth book completely blows away your whole thesis. Based on the nine books you had, the paper is logical, rigorous, and correct. But when you get the new information from the tenth book, you abruptly realize that while logical and rigorous, your paper is ... wrong.

Now it happens to be wrong on a topic that you're pretty sure your instructor is not an expert in, and it's a good paper, and you really need the grade.

So what do you do?

The pragmatic answer from most of my students is ship the damn thing back quietly and quickly and pretend you never saw it. I can understand that, but then we move the discussion to being an actual historian, or economist, or political scientist, or even environmental scientist, and ask the same question. What do you do if you've devoted hours and years of sweat and hard work to a particular proposition and discover--at the brink of publication--that you were wrong? That you can probably get away with suppressing the evidence that you were wrong, but you're still wrong, anyway?

What do you do?

In modern American society we lie about it, that's what we do.

Here's the example based on the concept of government redistribution of wealth.

Liberals tend to argue that government has a responsibility to redistribute wealth in order to (a) create necessary common infrastructure and (b) for purposes of economic/social justice to keep the concentration of wealth from pooling upward to the extreme disadvantage of most of the population.

Conservatives tend to argue that government should have no power to redistribute wealth; and should instead limit itself to the maintenance and regulation of contracts (and the prevention of fraud), allowing the market to control the concentration of wealth and power for the general good. By and large, when pushed, conservatives will admit that they support the preservation of concentrations of wealth in private hands, by government intervention if necessary.

Libertarians tend to go further than conservatives in this regard, and often imply that all but the most vestigal forms of taxation and government-run institutions and infrastructure are unconstitutional theft.

All of them like to refer to their own versions of American values and a cherry-picked, selective vision of US history and the Constitution in order to define a usable past that will support their ideas in the present.

Here's the problem: far from supporting any of these positions, American history supports the idea that all three positions have been strong dynamics in political debate from the very start of our Republic.

What did Alexander Hamilton want from the very outset of constitutional government? He wanted to use the power of taxation and fiscal policy to the advantage of certain sectors of the population in order to move America toward his particular favored objective. In his case, he wanted to use tariffs to encourage domestic industrial manufacture and shift the balance of economic and political power away from agriculture and merchants toward business and industry. But his objectives don't really matter: it's the fact that Alexander Hamilton, one of the Framers of the Constitution believed it was perfectly acceptable--even preferrable--to use the power of the government for social engineering.

Thomas Jefferson is usually presented as his opposite, because Jefferson opposed most of Hamilton's plans. But this is not the same as saying Jefferson opposed the use of government power for social engineering. Jefferson believed in an agrarian, yeoman republic, and despite a lot of contrary evidence, he believed one existed when the Constitution was written. So Jefferson saw the limitations placed on government as a means of maintaining what he saw as a preferrable status quo. In other words: most of the social engineering that Jefferson wanted had already been written into the Constitution. He was fighting with Hamilton not over the appropriateness of using the government for social engineering, but over the kind of social engineering he wanted the government to do.

Put that way, it's easier to see the Democrats and Republicans of the last two decades writ large: both want to use the power of the government to engineer their vision of how America should be.

Libertarians, on the gripping hand, tend to like to take those Constitutional limitations as something just short of graven holy writ, and see an intent in the Framers to create a rugged individualistic country where the government didn't do much of anything more than protect the ports, kill a few Indians, and deliver the mail. They see a past wherein America rose to greatness in an unfettered and undirected market economy.

All of which just goes to show you that they have not read a hell of a lot (if any) serious State and local history--especially economic history. Read solid economic studies of New England between 1750-1820, or New York between 1790-1850, or of Virginia between 1650-1770 and you will discover that State and local governments played a highly active, even intrusive role in the economies on a consistent basis, and that this was more or less universally accepted. Again, why? Because most notions of what local and region governments should do in economic regulatory terms came out of the medieval period, wherein those governments were expected to regulate and redistribute wealth. We find it hard to recognize that fact because (a) we don't want to see it; (b) they were regulating and redistributing for reasons and goals we don't generally agree with; and (c) most people have never seriously bothered to look at the issue in the first place.

Most (but certainly not all) historians agree that the strong free-market, non--regulatory dynamic arose in American history as a result of massive amounts of free land, the flow of excess capital into land speculation, and the extreme (for the 18th and 19th centuries) mobility of the American citizenry.

My point? History is rarely a legitimate proving ground for ideology. Ideology (liberal/progressive, conservative, libertarian, socialist, whatever) is generally based not on what has worked in the past, but upon a values-based vision of how things should be organized in the future.

Which is why cherry-picking limited examples for the success of your particular ideology from American history is--at best--naive, and--more likely--consciously disingenuous. Even among professional historians, sweeping generalizations and predictive models are in disfavor, because they so often founder on the facts--little, pesky things that get in the way of many a good argument.

So the next time you're tempted to cite this or that partisan account of either the Clinton Administration's tax policy, or Hoover's alleged failure to take action during the Great Depression, or even the originalist motives of the Framers, get a grip. You may be convincing to a lot of people, but your lack of intellectual integrity (and this includes mine as well; I am by no means immune to such forms of wishful thinking) is on promiment display.

5 comments:

I think the debate here (in the DE blogosphere anyway) is one of "should". That is, Republicans largely favor a freer market with varying degrees. The liberal wing of the DE blogosphere seems to want to create the Ministry of Plenty. That is, any time there is some sort of gap it is to be filled with government. Healthcare unsatisfactory? Nationalize it. Talk radio leans right? Create "fairness" laws. etc.

Liberals are pro governmentRepublicans are pro businessLibertarians are pro market

It sort of depends on how authoritatively that tenth book destroys your thesis. Even in hard sciences like physics or chemistry where you can cite repeatable experiments that clearly disprove a well-known theory or interpretation, it usually takes a generation or two to establish a new paradigm that radically alters the way things are done.

Most of the time you could probably remain intellectually honest by editing the paper in small ways to point out that most experts agree with you but X says this. If X does turn out to be another Copernicus or Einstein, there's always the time honored method of getting an extension and doing more research.

Paris, France, July 1785. It was 18 months after the end of the Revolutionary War in America, and four years before the start of the French Revolution. The need for weapons was on everyone's mind when Honoré Blanc invited high-ranking military men and diplomats to his gunsmith shop in Paris. He had taken apart 50 firing mechanisms (called "locks") and placed the pieces in boxes. The astonished visitors took random parts from the bins, assembled them into locks, and added them to muskets. They found that the parts fit together perfectly. For the first time it seemed possible to make guns out of interchangeable parts.

Thomas Jefferson, a diplomat in Paris at the time, was at the demonstration. The future United States president saw a way to address a big problem in his fledgling country. The United States was facing a shortage of weapons to defend itself and expand its boundaries. If interchangeable parts could be easily produced, then relatively unskilled workers could assemble a lot of guns at low cost, a real boon to the start-up country that had neither the money to buy guns nor the craftsmen to make them.

The challenge of creating a manufacturing process precise enough to make interchangeable parts for guns was taken up by Eli Whitney, who had recently patented the cotton gin. In 1798 Whitney was awarded a government contract to make 10,000 guns in two years. Ten years and several cost overruns later he finally delivered the guns, and even then the parts were not fully interchangeable. Nevertheless, Whitney is considered a central figure in developing the "American system of manufacture," a manufacturing system in which semi-skilled workers use machine tools and precise jigs to make standardized parts that are then assembled into products.

During the 1800s the United States grew dramatically as an industrial power, with much of the credit given to the new manufacturing system. Meanwhile in Europe there was strong resistance to replacing craft production. In France, Honoré Blanc's work was terminated by a government that feared losing its control over manufacturing if unregulated workers could assemble a musket. In England, the inventors of machines that automated both spinning and weaving were attacked by angry crowds who feared losing their jobs. But in America, labor was scarce and there were few craft traditions, so the new industrial model of interchangeable parts took root and flourished."

The histories you cite, while informative, cannot be considered entirely relevant because they were partially or in some cases entirely histories of the colonial period, and there is plenty of evidence that by the last quarter of the 18th century many of the colonists were thoroughly disgusted with the policies of the king, and his governors & magistrates.

The Articles of Confederation and to a lesser extent the Constitution (despite the fact that large portions of it were drafted by Hamilton prior to the convention) show a clear desire for the most minimal national government possible.

For the most part they were content to grant the state governments essentially plenary powers, but there was also a widespread belief that the people could keep the state governments from getting out of hand due to their proximity, and the frequency of elections (most had terms of two years or less for all offices). Also, the early state constitutions almost universally created very weak executive branches and vested nearly all power in the legislatures.

Delaware's Constitution of 1776 (which has been described as "a change in sovereignty rather than in government") was probably the most conservative of the early state constitutions. Nevertheless, it substantially weakened the executive, switched from a single house to a bicameral legislature, adopted a strong Declaration of Rights, and threw out a considerable amount of the colonial law.

Other states, most notably Pennsylvania, made far more radical departures from the forms of their colonial governments.

Even the most statist of people in the late 18th & early 19th centuries could not have even imagined a time when nearly one third of the people worked either directly for the government, or in taxpayer funded jobs.